Domestic bond markets set to boom

As China rebalances its reserves away from dollars, Jerome Booth, head of research at asset manager Ashmore, predicts a boom in local currency bond markets.

News first reported by the Wall Street Journal last week appears to show a massive shift in the currency composition of China’s reserves. The numbers appear to show that the proportion of China’s $3.2 trillion that is invested in dollar assets had fallen from 65% to 54% from June 2010 to June 2011.

While these figures cannot be confirmed, they are nevertheless an indication that a serious macroeconomic rebalancing is underway. And this will have...